# From Investment Gateway to Industrial Ecosystem: South Korea’s Web3 Market at a Critical Juncture in Q1 2025

## Easing Corporate Account Regulations: Impact on the Market

The “Roadmap for Corporate Participation in the Virtual Asset Market,” announced by South Korea’s Financial Services Commission, signals a pivotal shift. This roadmap outlines a phased allowance for corporate accounts to engage in virtual asset transactions, raising expectations for the legitimized business operations of Web3 projects and increased participation from professional investors.

## Building a Global Ecosystem

Global Web3 projects such as Avalanche, Ton, Ripple, and Solana are establishing substantial industrial foundations beyond mere marketing efforts. Through local builder ecosystems and hackathon initiatives, they are making tangible contributions to the South Korean industrial landscape.

### South Korea’s Web3 Market Post-Q1 2025: Still Just a Liquidity Gateway?

Despite active participation from individual investors and ample liquidity, the institutional infrastructure to support industry growth has lagged in South Korea. Policies focused on individual investor protection rather than ecosystem development have impeded substantial industry nurturing.

The primary obstacles were twofold: 1) Restrictions on linking corporate accounts for virtual asset transactions, and 2) High barriers to obtaining VASP licenses. Corporations faced difficulties legally converting virtual assets acquired through business into cash within Korean corporate accounts. Although alternative methods via foreign corporations existed, they carried regulatory risks and were not viable long-term solutions.

Additionally, high entry barriers for VASP registration hindered market growth. While small-scale businesses could operate without a VASP license, larger ventures faced regulatory scrutiny and legal uncertainties, deterring significant scaling.

These combined constraints stifled the healthy growth of the domestic virtual asset ecosystem, prompting many South Korean projects to relocate to countries like Singapore or the UAE, where regulatory frameworks are clearer and business operations more feasible.

This regulatory bottleneck has contributed to the perception that South Korea’s market is merely a fundraising platform for global projects. Consequently, it is challenging to refute the external characterization of the Korean market as a “liquidity exit.”

Contrary to this perception, recent regulatory improvements hint at an upcoming transformation. The allowance for corporate accounts to engage in virtual asset transactions signals a readiness for substantial market change. Moreover, global projects are building local ecosystems, bringing positive developments below the surface.

As industrial ecosystems mature, the South Korean Web3 market is expected to demonstrate higher value and potential, driven by strong investment enthusiasm.

## Regulatory Progress: Allowing Corporate Virtual Asset Transactions

In 2017, under then-Justice Minister Park Sang-ki, stringent administrative guidance effectively barred financial institutions and corporations from engaging in virtual asset transactions. Although the initial guidelines expired, the restrictive practices persisted, creating a dual environment where individuals could trade under restrictions, but corporations faced significant hurdles in investing and trading.

To address these constraints, the Financial Services Commission officially announced the “Roadmap for Corporate Participation in the Virtual Asset Market” on February 13, 2025. Notably, the roadmap details a phased repeal of the seven-year restriction on corporate virtual asset transactions:

1. **Phase 1 (Q2 2025~)**: Allow for law enforcement agencies, non-profit corporations, and virtual asset exchanges to liquidate virtual assets.
2. **Phase 2 (H2 2025~)**: Allow listed companies and registered professional investor corporations to engage for investment and financial purposes.
3. **Phase 3 (Mid-term to long-term)**: Full allowance for general corporations.

Phase 1 saw law enforcement agencies gain account issuance starting November 2024, enabling the liquidation of confiscated virtual assets. For non-profit corporations and virtual asset exchanges, account issuance will commence in Q2 2025. The more significant change in Phase 2, starting H2 2025, will allow listed companies and professional investors to trade virtual assets.

However, the majority of Web3 projects fall under the general corporation category in Phase 3, often not meeting the financial thresholds for professional investor status. Consequently, many projects, lacking a specified timeline, will not immediately benefit but will find trading opportunities as regulations gradually relax.

### Positive Impact of Allowing Corporate Account Trading

1. **Legitimate Pathways for Corporate Engagement**: This is a crucial initiation point for lawful corporate activities in the virtual asset space within Korea.
2. **Risk Management and Market Stabilization**: Professional investors with systematic risk management and long-term investment strategies can help mitigate market volatility.
3. **Diversification of Financial Services**: The expansion of corporate participation is expected to fuel the development of specialized funds, custody services, and integrated financial solutions for virtual assets.

Web3 projects often exchange services for tokens during operations. However, in the domestic market, corporations had virtually no legal pathway to convert these assets to cash. The new regulation marks a significant milestone, providing lawful means for corporate virtual asset activities.

The expected expansion for listed companies and professional investors in H2 2025 suggests further growth. With robust risk management systems, corporate investors can temper market volatility, potentially diminishing phenomena like the “Kimchi Premium.”

Moreover, broader corporate involvement will likely drive diversification in financial services. Asset management companies may develop specialized funds or acquire custody services, creating new business models. Integrating virtual asset accounts into corporate financial systems is also anticipated, fostering an expansive service ecosystem conducive to the Web3 industry’s broader growth.

### Potential Negative Impacts of Corporate Account Trading Allowance

1. **Price Decline Pressure from Trading Imbalances**: Phased regulation could lead to an imbalance in buy-sell dynamics, exerting downward pressure on prices.
2. **Heightened Taxation Efforts**: With the market entry of listed and professional investor corporations, government’s tax collection efforts will be evident.
3. **Investment Concentration in Bitcoin**: The conservative risk management of corporate investors may skew investments towards major assets like Bitcoin, potentially stifling the altcoin market.

The allowance of corporate accounts could significantly affect individual investors. In terms of market dynamics, phased regulations may create trading imbalances. The roadmap indicates that regulatory authorities perceive risks from selling-only corporates as relatively low. Thus, until H2 2025, sell-side funds may dominate, potentially applying downward price pressure. Given the limited scale of sell-offs relative to the market, liquidity-challenged assets might experience significant volatility.

Regarding the regulatory environment, the government’s intentions to bolster tax revenue will be clear. Taxation will be unavoidable once listed companies and professional investors enter the market. Although tax enforcement is deferred until January 1, 2027, potential political shifts after the June 3, 2025, presidential election necessitate close monitoring.

Investment patterns may see a pronounced shift towards Bitcoin. As evidenced by cases in the U.S. and Japan, corporate investors typically concentrate investments in major, stable assets like Bitcoin due to their conservative risk management, potentially neglecting the altcoin market where many Korean investors are actively engaged.

## Industry Transformation: Efforts by Global Projects

South Korea remains a key strategic region for global Web3 projects, following the U.S. and China. Many overseas projects are actively hiring Korean talent and forming substantial partnerships, aiming to build robust local ecosystems beyond mere marketing ventures. This approach has historically driven individual project growth and now enhances the competitiveness of South Korea’s entire Web3 industry.

### Project Support: Indicating Industrial Direction through Verified Projects

Avalanche and Ton Foundation exemplify efforts to build local ecosystems by supporting domestic projects. Post-successful partnership with MapleStory, Avalanche has expanded collaborations with small to medium Korean projects. Quarterly demo days showcase commercial products, encouraging user participation and creating a virtuous cycle of value for both projects and users. Ton Foundation’s “TON Society Korea Builder” registration system organizes Ton-based projects into a comprehensive DB, enhancing the domestic Ton ecosystem through structured support and network accessibility.

These support strategies yield positive outcomes beyond short-term goals, securing stable growth for verified local developers. Their success offers clear guidance for new market entrants and fortifies foundations for global expansion of domestic projects.

### Hackathon Initiatives: Nurturing Local Builders and Unlocking Potential

Hackathons organized by Ripple and Solana serve as pivotal transitions for the industry ecosystem. Ripple’s two-day “DE-BUTHON 2025” hackathon involved 24 teams and 203 participants, while Superteam Korea’s “SEOULANA HACKATHON” drew over 300 participants from 22 international partners.

These events effectively debunk the existing notion that South Korea is only investment-centric. High participation rates highlight a well-established local builder ecosystem. Such events go beyond competitions, serving as critical milestones bridging prototype and commercial stages, facilitating practical market entry for builders.

The outcome as of Q1 2025 shows that efforts of global projects to shift focus from merely “securing investors” to “building ecosystems” are manifesting in tangible successes in South Korea’s Web3 industry. Continuous collaboration with existing projects and developer programs bolster the potential re-ascendancy of South Korea’s Web3 industry. This solid foundation could ensure that South Korean Web3 projects gain global recognition for their achievements.

## Shift from Investment to Industry

South Korea’s Web3 market has reached a critical turning point in Q1 2025, transitioning from investment-centric to a mature industrial ecosystem. Regulatory improvements, such as corporate virtual asset transaction allowances, coupled with efforts from global projects to build local ecosystems, indicate entry into a practical growth trajectory.

## Notable Developments in the Financial Infrastructure

Another significant shift includes the successful initiation of the Bank of Korea’s central bank digital currency (CBDC) pilot project, “Project Han River,” targeting real-user transactions. Early April saw major domestic commercial banks begin collective issuance of Korean won-based stablecoins, with the Bank of Korea expressing clear intent in related regulatory legislation discussions.

Active discussions are also underway for the “one-exchange-multiple-banks” system, enhancing market flexibility and access by allowing virtual asset exchanges partnerships with multiple commercial banks rather than limiting them to single-bank affiliations.

These comprehensive changes signal the evolution of South Korea’s Web3 industry towards a sustainable industrial ecosystem, transcending mere investment hype. Overcoming long-standing regulatory and industrial barriers, South Korea’s Web3 market finally enters an era of tangible industrial growth.

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*The above article is a full coverage of “Q1 2025 Update on South Korea’s Web3 Market: Is It Just a Liquidity Gateway?” by Tiger Research, a global Web3 research partner of Block Media. The full report is available at the Tiger Research official site.*